Should Declining Profits Amid Rising Revenue Prompt New Questions for SM Energy’s (SM) Growth Strategy?

• In the past two weeks, SM Energy reported its third quarter 2025 earnings, revealing revenues of US$811.59 million and net income of US$155.09 million, along with the completion of a US$12.12 million share buyback tranche and updated production guidance for the remainder of 2025.
• Despite higher revenues compared to the previous year, the company saw a decline in net income and earnings per share, while recent analyst ratings shifted with two downgrades to Hold and one Buy, reflecting mixed investor sentiment.
• With quarterly net income falling even as revenue rose, we will examine how this shapes SM Energy's longer-term investment outlook.

Find companies with promising cash flow potential yet trading below their fair value.

SM Energy Investment Narrative Recap

To be a shareholder in SM Energy, investors generally need confidence in the company's ability to sustainably grow oil and gas production, maintain operational efficiency, and manage risks tied to its concentrated asset base. The recent Q3 2025 earnings announcement, which showed higher revenue but declining net income and EPS, does little to materially impact the immediate production-driven catalyst for the stock; however, it highlights the volatility of earnings in the face of shifting regional performance and fixed costs.

Among recent announcements, SM Energy's updated production guidance, projecting 206-212 Mboe/d for Q4 and 207-208 MBoe/d for the full year, is most relevant as it speaks directly to the company's operational outlook and short-term revenue potential. This narrowed and slightly more precise forecast suggests ongoing commitment to production growth, which remains at the heart of near-term investor expectations despite ongoing pressure on margins and the uncertainty of regional logistics in basins like the Uinta.

In contrast, while increased production remains essential, investors should also be aware of the risk that...

Read the full narrative on SM Energy (it's free!)

SM Energy's outlook anticipates $3.5 billion in revenue and $550.3 million in earnings by 2028. This forecast requires annual revenue growth of 5.7%, but earnings are expected to decrease by $262.4 million from the current $812.7 million.

Uncover how SM Energy's forecasts yield a $36.64 fair value, a 94% upside to its current price.

Exploring Other Perspectives

Four members of the Simply Wall St Community provided US$35.50 to US$315.24 fair value estimates. With recent earnings reflecting margin and profit challenges, your viewpoint on SM Energy’s longer-term prospects may differ considerably from others, consider the full spectrum of expectations before deciding your next move.

Explore 4 other fair value estimates on SM Energy - why the stock might be worth just $35.50!

Build Your Own SM Energy Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your SM Energy research is our analysis highlighting 2 key rewards and 5 important warning signs that could impact your investment decision.
• Our free SM Energy research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate SM Energy's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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